So what happens?: I've asked this question on different discussions before but haven't gotten an answer. What happens to the health care industry as it stands, should private payers be phased out of existence? How many employees in a currently healthy industry will be put out of business?

What happens to the medical equipment suppliers - will they have to bid for a contract from the Appropriations committee to provide service to a government plan?

And finally . . . has there been any tally on how much of the government controlled health care is outsourced to private companies, including state Medicaid plans? Isn't it ironic that the "more efficient" government plans have to contract with big bad health insurers to get the job done?

Steven Pearlstein: The essence of health reform now, as it was under Clinton, is managed competition in a market that involves lots of private players -- insurers, physicians, hospitals, equipment makers, etc. There is no proposal here for a government run system, but there is one for a government regulated system, with the government as a big and hopefully demanding payor on behalf of taxpayers and patients. The Republican name calling -- government run health care system in which government bureaucrats will decide what health care you get -- is maliciously untruthful and, frankly, leads people who want to get something done to disqualify them from the conversation. And that isn't just Democrats, but very serious health reformers, providers, insurers, doctors, nurses, etc.

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Atlanta, Ga.: If Congress mandates that every person in the United States have health care coverage, do you think that will be challenged in court? I don't see any language in the U.S. Constitution that grants Congress authority to do that. Also, it sounds like another unfunded mandate to me.

Steven Pearlstein: Well, it is an interesting question, actually, and not one I have seen addressed. It is probably allowed under the taxing power of the government, since those who don't have insurance will have to pay a tax.

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Washington, D.C.: I'd probably be willing to pay more in taxes to ensure that all Americans have health insurance IF I wasn't already looking at the very real prospect of paying more income tax so that 40-50% of Americans don't have to pay any income tax at all.

I get the concept of sacrificing for the whole. I don't get the concept of extreme income redistribution, which is where we seem to be headed.

Steven Pearlstein: Neither do I.

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Reston, Va.: Mandatory participation in any business (including healthcare) runs against my personal notion of a free market system - where customers benefit from competitive pricing.

I would agree we need to re-engineer our healthcare system so that the general population will have affordable access irrespective of income. But requiring people by law to become mandatory customers in a business is unreasonable.

I suspect this is designed intentionally to create a bubble. Pension fund managers have relied on AIG to give them access to "lower" rated bonds without (in theory) incurring the related risk. But that method of investment is broken.

Could it be that pouring cash monthly into the healthcare industry (with the advantage of easily forecasting growth since the numbers originate from mandatory payments) is really nothing but a strategy to infuse the investment community?

Steven Pearlstein: You were going along fine till you got to the bubble. That's not what's going on. The requirement that businesses participate on behalf of their workers comes from the simple logic that we have an employer based system that lots of people find acceptable and so we want to build on it. Having some employers pay and other not distorts the marketplace to a degree, and also shifts costs from those who don't have insurance onto those who do. This divide gets even worse as more employers drop coverage. So the policy design choice is either to move away from the employer based system, which many experts prefer, or require all employers to participate. In the end, of course, economists tell us that it is the employee who pays both the employer and employee share in the form of foregone wages, so it all should come out the same. But in the short run, an employer mandate does present some challenges that can be addressed with a bit of subsidy, a long lag in the effective date, etc. The impact on employment and small business survival is greatly exaggerated, as I wrote a couple of weeks ago and as implicitly confirmed by the Congressional Budget Office in its "scoring" of the House reform plan. That plan includes a mandate, but the CBO did not predict any big employment effects on the economy as a whole.

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anonymous: I'm sorry I still don't think I should have to have mandated car insurance let alone health insurance. And I think the numbers of uninsured is much less than we have been repeatedly spoon fed recently by politicians or persons with certain other agendas. Some reputable entities place the figure more at 13 ml. for the uninsured. There are much better, less drastic ways of improving the health care situation. Just like the financial fiasco, the country needs more regulation of the health care companies: no exclusion clauses or whatever they are called, no preexisting conditions and minimally variable premiums. We need to get rid of the fraud ,not punish the good, responsible healthy-living types. As an independent I really think the Congress needs to be refocused, more down to earth and less in crisis mode. They need to put their logical thinking hats on. This problem has been around for awhile. Rash legislation outlawing the right to private health insurance plans in America can't be the proper course. Why not just mandate that the health insurance companies can't increase premiums for a certain duration?? Thank you for taking my rant and questions.

Steven Pearlstein: Who is outlawing private insurance? Where do you get these things, anyway? Let me be clear: whoever told you that anyone in Congress or the White House wants to do that LIED to you.

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New York: Steven, I hope you can take an early (and long) question. I pay for my own health insurance -- $5,000/yr. for an individual, through a professional group -- though I hope someday to get it through an employer. I would love to see health care reform result in lower premiums. Since cost is so crucial to successful reform, why not implement a plan to reduce health care costs before trying to cover everyone? Hospitals, insurers, and other players have committed to cost savings, so why not just work on that? Give it a year or two, then launch a plan to cover more people once premiums come down. Wouldn't that mitigate the problem of how much reform will cost and how to pay for it? Right now, I'm not excited at the thought of being forced into paying for insurance I can't afford. The cost is not going to go down the day after the bill is signed, after all. Thanks.

Steven Pearlstein: This is a good question and the answer has two parts. First, from a political point of view, you can't make people eat all the spinach without having some dessert at the same time. But more significantly, most health reformers who have spent decades trying to design a better system say you can't really get a handle on cost control and cost shifting until you have everyone as a part of the insurance system. So you have to do universal coverage and cost control simultaneously. That doesn't mean you can't phase things in a bit, but you also have to be careful not to get bad insurance market dynamics going during the transition period. The lesson from Massachusetts is that you should do the two things together.

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Atlanta, Ga.: 1) $250k is not -that- much money. Why, in NY you could live on ramen noodles in a studio apartment with that salary. We can't keep taking from the top, or the top's going to just stop producing (and I am far far away from making that much money).

2) why not start taxing the 40+% of income earners who don't pay ANY taxes (and get a 'tax credit' - er, welfare)?

3) Why do we have to start out with a trillion dollar plan? Why not start out with a test idea somewhere? And see how it goes? I've read that the plan in Massachusetts is not only costing more than planned (duh!) but is pretty much horrific for people who live there.

4) We are an incredibly diverse country, so, well, no one else's answer to health care should work here. How can anyone say what would work in one area would work in another? And should it? We already have a shortage of doctors in certain places and specialties - are we now going to force doctors to do and go where we want? Way to decrease applications to medical school.

5) Why are we not only keeping but enforcing the employer driven health care model? It's a terrible model. We need to be encouraging the ideas to get away from it (if only that it is KILLING entrepreneurship in this country by means of - well, people can't really quit their jobs to start businesses).

Steven Pearlstein: I've already addressed a number of these points.

Your point about people not paying income taxes is half right -- they pay payroll takes equal to 7.5 percent of their income, which for low income people is a big chunk. That probably isn't a good source of more government income.

The Massachusetts plan did not cost more than expected -- it just cost more than expected sooner than expected. That is a measure of the plan's success in getting everyone signed up for insurance. It is true that the cost growth is still a problem and now the governor and legislature and the special interests have stepped up to the plate and are working on a plan to move away from the fee for service model to something different and better -- many of the reforms I mentioned in today's column.

The point here is that if people are willing to work together and try things and fix them as we go along, this CAN be done. Massachusetts is actually a success story overall. But to do it you have to just do it in the way you think best, fix mistakes as they arise and don't get too hung up on budget assumptions that, in effect, assume you will fail.

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Floris, Va.: Today on Morning Joe you said that all of the bailouts in totality would cost "less than a trillion dollars." Nobody asked the follow-up question, so I will. If there were no bailout plans at all, how much would that have cost?

Steven Pearlstein: It would have resulted in the loss of many hundreds of billions of government income and profit revenue when a fiscal crisis brought down the entire global economy. That's why we did it. There would have also been even bigger losses for households and businesses.

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Bethesda, Md.: Why do people have a problem with everyone needing to have at least a mandated policy? We have that for car insurance because when we drive we take the risk that we may harm people and/or cost lots of money. By living, we might use more healthcare than we can afford, so we must all contribute something. If you do not want health insurance, you can pay full price for all of your healthcare yourself, and see where that gets you.

Steven Pearlstein: What happens is that because we don't let people die when they are sick, even if they don't have money, the cost gets shifted to taxpayers and other insurance premium payers. That reason alone is why health care cannot be a pure free market. Another is that the elderly are essentially uninsurable -- in a pure free market, no company would insure them at a cost that most elderly could afford. So that requires a program like Medicare, in which the government collects money from the young and health to pay for the medical care of the old and sick, on the theory that at some point we'll all be old and sick. It's worked out pretty well and gives a lie to the notion that government can't run a health insurance program that people will like. The problem is they like it too much!

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Hobe sound, Fla.: I'm wondering if in the end we get a bill that mandates everyone must have insurance and we don't get a bill with a public option plan, then how will we escape the high cost of private insurance premiums?

What measures would be in the bill (without a public option) that would guarantee affordable quality health care.

RN for 25 years and appalled by the idea of continuing to allow private insurance companies to dictate health care.

Steven Pearlstein: You could probably design a good plan that reforms the way health care is delivered and paid for without a public plan, by using Medicare and Medicaid to force changes in the system. They are big enough that they can do that. But it would actually be better to use the "public plan" to do that, since it is easier to introduce change with peoople who aren't elderly and aren't poor and disabled. That would be my preference -- have a public plan, but make sure it is not a Medicare-like fee for service plan, but one based on disease management, bundled payments to hospitals and doctors and capitated payments to accountable care organizations, to use the reform jargon.

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Richmond, Va.: Maybe it wasn't part of the gist of your article, but I noticed that you did not mention the Republicans who are spending gobs of money, time and talk on trying to undermine -- perhaps destroy -- not only this president, who box or no box, is trying to tackle this unwieldy, complex and urgent problem but any health care reform altogether.

Steven Pearlstein: I didn't mention them because most of them have voluntarily made themselves so irrelevant to this process that its not worth the time and space to treat them seriously. These are the same people who did nothing during the last decade to address this issue -- nothing! They haven't come up with any new ideas since except the ones that the public already rejected. And they now view this whole exercise in purely partisan terms. Some Democrats do as well, which I really find unfortunate. But for the most part, it is the Republicans who are poisoning the political well here.

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Columbia, Md.: Hi Steve, Having a bill 'better' than the status quo is not necessarily good either. Statistically speaking, an accident that kills 10 people is better than one that kills 20 people, but it is still a bad accident. I want everyone that wants and needs insurance to get it - no ifs or buts about it. But rushing through a bill to fix an admittedly broken system in just a couple of months is downright crazy, if not scandalous. No one, not even the president, has been honest with us about the cost and the other details. I would rather someone told me what I am expected to pay and then let me work it into my budget than be tricked into accepting a 'better bill' and then find out that I and my boys will be expected to foot the bill for years to come. The president owes it to us, after all, he ran on a promise of change. This definitely is NOT change, but same old politics. Please do not get carried away and give up the whole shop for the sake of 'change' or a 'better bill'. We need a good bill. Simple as that.

Steven Pearlstein: This isn't the work of a few months. Lots of very smart and dedicated people have been working on this for 15 years, waiting for this opportunity. They have good ideas, they know what they are doing, they aren't blinded by ideology. In some instances they are heads of business groups or professional groups that you would call special interests and they know a lot about the current system. So the idea that we are rushing to judgment without broad consultation is not true. Does this have to be done by the end of September. Of course not. But there is truth to the idea that if you let Congress take its usual sweet time with this, there will be too much influence from very narrow special interests and you will get a less satisfactory bill or no bill at all. Sometimes the only way you can push things along is to set artificial deadlines. Just ask any private-sector CEO.

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Okemos, Mich.: I fear that the health reform that we really need is going to go the way of Hillary Clinton's proposals in the Clinton administration. Wouldn't the Obama administration have been better off dividing health issues into solvable modules than trying to boil the whole ocean?

Steven Pearlstein: No, its all of a piece, really. Its a complex machine in which all the parts interact.

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Manassas, Va.: None of the people who are trying to rush government-run medical care through Congress before we have time to think about it are pointing to Medicare, Medicaid or veterans' hospitals as shining examples of how wonderful we can expect government medical care to be when it becomes "universal."

The relevant question becomes whether the alternative is either less expensive or of better quality. Nothing is cheaper just because part of the price is paid in higher taxes.

It feels like being rushed by a used car dealer to sign on the dotted line. But getting stuck with a car that is a lemon is nothing compared to signing away your right to decide what medical care you or your loved ones will get in life and death situations.

Steven Pearlstein: On your second point, it turns out that cheaper and better often go together in health care. We have lots of evidence of places that do both at the same time by practicing evidence based medicine in new and collaborative ways.

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Melrose, Fla.: Regional health plan cooperatives, analogous to electric cooperatives, are being touted as a compromise "public insurance option" that is not a "government option." Since health care is so different from electric service, is this a useful analogy, and don't we already have this in the Blue Cross/Blue Shield Associations, which have been forced by market pressures from the for profit insurance sector to behave just like them in order to survive? How can this possibly keep the insurers honest?

Steven Pearlstein: The important thing about the public option is not its corporate form (government owned or a cooperative) but what kind of medicine it will pay for. And if it is just another fee for service insurance plan, it won't do much and won't be worth the candle. The cooperate thing is really a diversion from the real issue, in my opinion.

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South Riding, Va.: Can't we make health care more affordable by eliminating health insurance all together? They are just an industry of large, profit making companies that get in the way of true health care. I bet that 50% of all money spent on health care goes to the insurance companies and their overpaid executives. Also, without the red tape, I could get quicker care. Just let everyone pay their own medical bills.

Steven Pearlstein: I bet you're wrong. In fact I know you're wrong.

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Detroit, Mich.: President Obama continues to say that "If you like your current plan, you will be able to keep it." Is he really being truthful with the American people? I saw a recent evaluation of the House bill that says 80 million people would lose their employer coverage under the plan. Also, if health care insurance companies, Kaiser and Blue Cross, eg., lose private sector enrollees in sufficient numbers to the public option,I believe it is inevitable that they will not be able to continue with only federal employee as their enrollees - there aren't enough of us (yet) to make it viable.

Steven Pearlstein: As I wrote this morning, I think it is misleading to promise people that nothing will change. We need for a lot to change. The better way to design a reform plan is for people to have options and chose a better option. That's why this is a market-based reform plan. But for it to work, there have to be carrots and sticks to move the system--patients as well as providers--toward fundamental change in the way health care is delivered. That's what Obama needs to emphasize. The one thing that almost nobody likes about the current system (except providers) is that the costs go up each year much faster than our incomes go up. And to fix that, you have to change a lot of other things.

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Manhattan, Kan.: Hi Steve--just a comment: Thanks for this exceptionally well-informed discussion. You've debunked more myths about health-care reform in less than an hour than 24/7 news has in a decade. I only hope that Obama uses your discussion as his crib sheet for tonight's presser.

Steven Pearlstein: I bet he's hanging on every word.

NOT.

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Raleigh, N.C.: To be honest, this whole health care proposal is confusing me and most of my peers. Your articles are perhaps the best at explaining things, but questions remain.

I understand the theory of the individual mandate to lower insurance premiums, but what incentives to insurers have to do so? What if costs can not be controlled in the short run? Won't premiums continue to rise for everyone?

From my perspective, if you tax my health benefits, I want to see those savings pronto!

Steven Pearlstein: The only incentive insurers have to lower premiums is the incentive to stay in business and not lose out to lower-cost, higher-value competitors, just like any market. Your grocer doesn't have any incentive to lower the price of butter, but sometimes he does when the grocer across the street, in the search of market share, offers butter on special. Anyway, you get the point. Just because health care isn't and can't be a pure market doesn't mean you can't have a lot of market mechanisms at work.

As for when you'll see premiums come down, in terms of private premiums, in theory we should see some one-time reductions right away as lots of young, healthy people are added to insurance pools, as individuals and small businesses get the benefit of the big risk pools that the insurance exchanges will create and as the amount of uncompensated care at hospitals is reduced because everyone has insurance. That's all one time stuff. The real test will be the more structural reforms that take time to implement that will "bend the curve" of medical cost growth over the long term.

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Alexandria, Va.: I am an independent health insurance broker in Virginia, Maryland and the District of Columbia. Currently insurance is regulated by the states with different rules in each jurisdiction. Believe it or not I favor a public option. However I'm concerned that as long as there are private options I think my role as an agent and advisor is crucial to help people navigate the insurance marketplace. I certainly welcome the elimination of the underwriting process that cherry picks the best risks while rating up or declining people with preexisting conditions. The underwriting departments of insurance companies are made up of highly knowledgeable medical professionals who could be more usefully employed as diagnosticians or medical transcribers rather than simply serving to guard the bottom line of insurance companies. At the same time their elimination would reduce the overhead expense of insurance companies.

Another reform that I feel should be addressed is the tax treatment of HSAs (Health Savings Accounts). The current structure unduly rewards those in the higher tax brackets. Congressional investigators revealed that the adjusted gross income for enrollees in HSAs was about $139,000, compared with $57,000 for all other tax filers. The inequity of HSA's comes from the structure of allowing contributions to be deducted from taxable income. Thus the greatest advantage accrues to the highest tax bracket. It would be more equitable if a given percentage, perhaps 20% or 25% of HSA contributions were applied as a tax credit. I'll leave it to budget analysts to find a revenue neutral percentage. This would make it a fairer incentive for everyone to save for their initial health expenses and look to insurance only to cover catastrophic health costs. After all isn't that what insurance is supposed to do.

The vast majority of health insurance plans are forms of managed care, HMOs or PPOs where participating physicians, clinics and hospitals have agreed to a discounted negotiated fee schedule. But each insurance company has it's own network making it confusing and inconvenient to change insurance companies. I would propose that these networks be unified both for private insurers and the public option. This would level the playing field at the same time simplifying the claims process and eliminating unnecessary paperwork. Those champions of free enterprise who fear that the public option will be operating with an unfair advantage would have their fears assuaged. Doctors who so choose could opt out if their services are sufficiently in demand that they don't need to discount their fees.

There is one more area that could greatly reduce healthcare costs. I have been informed that on average 75% of lifetime medical expenses are incurred in the last 90 days of life. This is the result of expenses associated with what are termed heroic efforts involving such interventions as running heart lung function machines for comatose or even brain dead patients. There should be an effort to educate people to file advance medical directives to avoid this needless type of expense.

I don't pretend to have all the answers. We need more primary care physicians and nurses in the healthcare delivery system. There needs to be malpractice reform to transform preventative medicine to preventing disease rather than lawsuits. I believe my proposals are simple and affordable. They would help reduce costs and be equitable for both consumers and insurers.

Is the idea of taxing (at least above a certain cap) employer provided health insurance benefits completely dead in Congress at this point?

P.S. I appreciate your calling out both the President and his critics as appropriate.

Steven Pearlstein: I don't think it is dead because it is the right thing to do and they need sources of revenue. But they may have to discard it and then come round to it in the end. That happens sometimes.

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Boston, Mass.: How to weed out unnecessary costs- the fly in the ointment. This reminds me of the merit pay argument with teachers- give me a classroom of polite, learning eager children with parents very involved in the educational experience, sure I'll guarantee you outstanding test results- but give me a real life classroom with the myriad of situations.... In a perfect world doctors could be held accountable for limits on tests and prescription drugs if all people were alike. However this "outcomes payment" system proposed is only going to create a system where doctors cherry-pick their patients.

Steven Pearlstein: It's an interesting question that poses a challenge for designing a new system but I don't think it is insurmountable. People have gotten pretty sophisticated about risk adjustment and that is probably the best way to reduce the problem you envision. In other words, if a doc winds up with a classroom of kids who are hard to teach, then he will be paid on the basis of how he improves things, not on absolute outcomes.

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Washington, D.C.: I second Manhattan, Kan.'s statement. I rely on your columns to understand the health care situation. To say that most of the "information" provided 24/7 by the media is unhelpful or misleading is an understatement.

Steven Pearlstein: Thanks to you and Manhattan, Kan.

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Alexandria, Va: Unfortunately this discussion brings out the level of misunderstanding on the part of your questioners. For example there are actually far more uninsured or underinsured than statistics indicate. Many people with only a hospital indemnity plan that pays far less than the actually costs per day in the hospital think they have medical insurance.

Steven Pearlstein: There is some debate about the statistics, but I think we can agree that whatever the number, it is too high.

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Princeton, N.J.: O.K. Steve, you tell me we can't have Medicare for All because the politicians won't go for it. I tell you that we can't have practice and payment reform because the docs won't go for it.

Maybe it's time to move. I hear Victoria Island is beautiful.

Steven Pearlstein: It's quite beautiful this time of year. Taxes are high, though.

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Great Falls, Va.: Steve, I have been following your columns on the issue of health care reform, and you present excellent ideas within our current health care system. Frankly, however, I am thoroughly disgusted with the present system. This morning, for example, United Health Insurers was reported as earning in excess of $800 million for the quarter. The private insurers are an essential part of the problem for a number of reasons. Doctors in a fee for services system are also very much part of the problem. Mine , for example, now eschews Medicare.charges me his fee,but does submit the forms so I can be reimbursed for the difference between his fee and the Medicare payment.

This system is totally broken. It needs to be redone, but that will not happen with the politicians all taking handouts from the insurers, and other interested parties. Sorry, just had to vent.

Steven Pearlstein: There isn't enough price compeition in the system now, you are right, and that results in the kind of profit levels you mention. I'm all for having insurers earn decent profits, but I'd hope that would come from keeping costs down and improving the quality of care and changing the way medicine is delivered -- not by using their scale to squeeze everyone else. The reform efforts try to address that problem.

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Steven Pearlstein: Our time is up and my boss wants to take me to lunch so I'm gonna sign off now. I think that's the good career move, don't you? "See" you next week.

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